Saturday February 20, 2010

Malaysia must catch up to gain high-income status

WITH 2020 only a decade away, Malaysia has a lot of catching up to do if it is to become a high-income economy.
This was the message conveyed by several prominent speakers at the recent 1Malaysia Economic Conference in Kuala Lumpur.
Malaysia’s new economic model, which will be the backbone of the 10th and 11th Malaysia Plans, is expected to accelerate the country’s progress into the next decade to ensure the success of Vision 2020.
According to the World Bank, a high-income economy is one with a gross national income per capita of US$12,000 and above.
Datuk Noriyah Ahmad, director-general of the Economic Planning Unit in the Prime Minister’s Department, said Malaysia recorded relatively slower economic growth from 2000 to 2008 compared with the 1990–1997 period.

“The country’s gross domestic product growth from 2000 to 2008 averaged around 5.5% compared with 9.1% from 1990 to 1997.

“Malaysia has not caught up with the high-income economies and if the trend continues, we may be overtaken by other rapidly developing economies,” she said.
In addition, the country’s private investments also need to be revitalised as savings exceed investment by a significant amount largely due to a collapse in private investment.

“Our workforce today is also relatively unskilled with 80% educated up to Sijil Pelajaran Malaysia level or its equivalent, and only 25% of Malaysian jobs are in the higher skill category,” she said.

Noriyah said Malaysia still had a long journey ahead as its gross national product (GNP) per capita stood at US$6,686 in 2007 and was projected to hit US$15,340 in 2020, only marginally above the minimum GNP benchmark of US$14,818 for high-income countries.
Going forward, she said the Government has taken new steps in development planning, with the introduction of a two-year rolling plan under the 10th Malaysia Plan (10MP).
“Other measures in the 10MP will come from the private sector which is expected to be the engine of growth.

“We have come a long way from being an agro-based to a service and manufacturing-oriented economy. But this model is already outdated, hence the new approach under the 10MP,” she said.

On a short-term perspective, Universiti Sains Malaysia pro-chancellor Tan Sri Dr Lin See-Yan said there were several areas that needed to be addressed.
“Wide-ranging private business initiatives are needed to lead sustainable recovery and not direct consumption. Unlike China, our consumers favour spending once permanent income is forthcoming. Business confidence must be nurtured where stimulus is still needed until recovery is secured,” he said.

He said the Government’s role remained to facilitate the continuing flow of private investments, where priority is to bring about demand, a visionary transportation infrastructure and modern utilities to support new growth areas.

“There is a talent war out there. The global market for talent is highly competitive,” he said, adding that the new green agenda also needed urgent attention as well.
“Being green or environmentally friendly is not an option. We have to re-invent and expand green stimulus elements that include energy efficiency and renewables, mass transit, smart electricity grid, finance and reforestation,” he said.
From a private sector perspective, Association for Shopping Complex and High-Rise Management president Joyce Yap expects the new economic model to further promote the retail industry.
“The retail industry is the second largest contributor to tourism expenditure and supports 204,000 employees.
“Thus, it is important to continue developing Malaysia as a prominent shopping destination in this region; to be comparable with countries like Singapore and Hong Kong,” she said.
Yap recommended that the Government crafts consistent and long-term policies to encourage domestic spending and market Malaysia abroad.

 http://biz.thestar.com.my/news/story.asp?file=/2010/2/20/business/5662945&sec=business